The Excel EFFECT function returns the effective annual interest rate, given a nominal interest rate and the number of compounding periods per year. Effective annual interest rate is the interest rate actually earned due to compounding.

**Syntax**:= EFFECT(nominal_rate, npery)

The EFFECT function syntax has the following arguments:

**Nominal_rate**Required. The nominal interest rate.-
**Npery**Required. The number of compounding periods per year.

**Example**: Let’s look at some Excel EFFECT function examples and explore how to use the EFFECT function as a worksheet function in Microsoft Excel:

**Syntax**: =EFFECT(A2,B2)

**Result**:

Based on the Excel spreadsheet above, the following EFFECT examples would return:

**Syntax**: =EFFECT(A3,B3)**Result**: 0.075

**Syntax**: =EFFECT(A4,B4)**Result**: 0.07640625

**Syntax**: =EFFECT(A5,B5)**Result**: 0.077135866

**Syntax**: =EFFECT(A6,B6)**Result**: 0.077632599

**Syntax**: =EFFECT(A7,B7)**Result**: 0.077875846

**Syntax**: =EFFECT(A8,B8)**Result**: 0.103812891

**Syntax**: =EFFECT(A9,B9)**Result**: 0.02515625

**Syntax**: =EFFECT(A10,B10)**Result**: 0.0816

**Note**:

- #VALUE! error – Occurs when:
- The nominal rate argument is not a numeric value.
- The npery argument is not a proper numeric value.
- Any of the arguments provided is non-numeric.

- #NUM! error – Occurs when:
- The given nominal rate argument is less than or equal to 0.
- The given npery is less than or equal to 0.

- If npery is in decimal format, it is truncated to integers.
- The EFFECT function is related to the NOMINAL function through Effective rate = (1+(nominal_rate/npery))*npery – 1
- EFFECT is calculated as follows: